INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (IPA II)

INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (IPA II) INDICATIVE STRATEGY PAPER FOR TURKEY (2014-2020) ADOPTED ON 26/08/2014

TABLE OF CONTENTS PART I: INTRODUCTION... 3 1. PURPOSE...... 3 2. CONSULTATION ON THIS STRATEGY PAPER... 4 PART II: ANALYSIS OF THE NEEDS AND CAPACITIES... 4 1. POLITICAL AND ECONOMIC CONTEXT 4 2. CONTEXT FOR THE PLANNING OF ASSISTANCE... 6 PART III: THE OVERALL DESIGN OF PRE-ACCESSION ASSISTANCE TO THE COUNTRY... 11 PART IV: EU ASSISTANCE DURING THE PERIOD 2014-2020... 13 1. DEMOCRACY AND GOVERNANCE... 13 2. RULE OF LAW AND FUNDAMENTAL RIGHTS... 20 3. ENVIRONMENT AND CLIMATE ACTION... 26 4. TRANSPORT... 29 5. ENERGY..... 32 6. COMPETITIVENESS AND INNOVATION... 34 7. EDUCATION, EMPLOYMENT AND SOCIAL POLICIES... 38 8. AGRICULTURE AND RURAL DEVELOPMENT... 41 9. TERRITORIAL AND REGIONAL COOPERATION... 44 ANNEX 1. INDICATIVE ALLOCATIONS... 46 ANNEX 2: INDICATORS AND TARGETS... 47 2

PART I: INTRODUCTION 1. Purpose This Indicative Strategy Paper for Turkey (the Strategy Paper) sets out the priorities for EU financial assistance for the period 2014-20 to support Turkey on its path to accession. It uses the political priorities set out in the enlargement policy framework to identify key areas where financial assistance is most needed and most useful in helping Turkey meet the accession criteria. The Instrument for Pre-accession Assistance (IPA II) 1 is the main financial instrument for providing EU support in implementing reforms to move towards EU membership. Financial assistance under IPA II is given for the following four specific objectives: (a) support for political reforms, (b) support for economic, social and territorial development, (c) strengthening the ability of the beneficiary country to fulfil the (future) obligations stemming from membership in the EU by supporting progressive alignment with the Union acquis, (d) strengthening regional integration and territorial cooperation. Furthermore, the IPA II Regulation requires financial assistance to focus on five policy areas: a) reforms in preparation for Union membership and related institution-and capacity-building, b) socioeconomic and regional development, c) employment, social policies, education, promotion of gender equality, and human resources development, d) agriculture and rural development, and e) regional and territorial cooperation. In order to increase the impact of the EU s financial assistance, it will be concentrated on the areas where reforms or investments are most needed to meet accession criteria, and will be tailored to take into account Turkey s ability to meet these needs. Assistance will be planned in a coherent and comprehensive way, ensuring that it best meets the four specific IPA II objectives and addresses the relevant thematic priorities for assistance listed in Annex II of the IPA II Regulation as well as the thematic priorities for assistance for territorial cooperation listed in Annex III of the same Regulation. Moreover, EU assistance is only one of the tools to achieve the necessary progress. When deciding on priorities for action, due account needs to be taken of the beneficiary country s own capacities and the support provided through other EU instruments and by other stakeholders, in particular the international community, bilateral donors or international financial institutions. Preference will therefore be given to providing financial assistance under a sector approach, which will ensure a more long-term, coherent and sustainable approach, allow for increased ownership, facilitate cooperation among donors, eliminate duplication of efforts and bring greater efficiency and effectiveness. To ensure that the priorities for EU financial assistance for Turkey over the coming seven years are delivered, this Strategy Paper sets meaningful and realistic objectives, identifies the key actions and actors, describes the expected results, indicates how progress will be measured and monitored, and sets out indicative financial allocations (Annex 1). The priorities defined for financial assistance will serve as a basis for the (multi-) annual programming of IPA II funds between 2014 and 2020. Indicative financial allocations allow 1 OJ L 77, 15.03.2014, p. 11. 3

for an appropriate amount of assistance to be used to reward Turkey for performance and progress over a period of several years but this should be assessed by 2017 and 2020 respectively, as stipulated in the IPA II Regulation. The Strategy Paper will be reviewed at mid-term and revised as appropriate. It may also be revised at any time by the European Commission. 2. Consultation on this Strategy Paper This Strategy Paper was drawn up in partnership with the relevant Turkish authorities, including the Ministry of EU Affairs (the National IPA Coordinator), the Ministry of Development and the line ministries that will be lead institutions for different sectors. Turkey s input was discussed during several meetings between 2012 and 2014, resulting in priorities being set for IPA II financial assistance within the different sectors. The Commission has considered Turkey s comments on draft versions of the Strategy Paper and taken these into account as far as possible. A strategic dialogue was held with the European parliament, and Member States embassies in Ankara were consulted on an earlier draft of the Strategy Paper. The Commission and the EU Delegation to Turkey organised consultation meetings with other donors, international financial institutions (IFIs) and international organisations (IOs) to gather additional comments and recommendations. A draft version of the Strategy Paper was shared online for consultation with civil society and meetings were held in Adana, Izmir and Ankara, where civil society representatives provided comments which have been considered in the drafting process. PART II: ANALYSIS OF NEEDS AND CAPACITIES 1. Political and economic context Turkey is the biggest of the candidate countries for EU accession, with a population of some 75 million on a territory of 783 562 square kilometres. Half of Turkey s population is younger than 30 years old and 77.3 % of the total population live in urban areas. It plays an important regional role, as a result of its strategic location between Europe and Asia. It has borders with eight other countries, including EU Member States, and borders the Black Sea, the Mediterranean and the Aegean Sea. Turkey is a parliamentary republic and a unitary centralised state. Since 2002, Turkey has been ruled by a single-party government from the Justice and Development Party (the AK Party), led by Prime Minister Erdoğan since 2003. Turkey became a candidate country in 1999 and accession negotiations started in 2005. The Turkish government has engaged in reform efforts to address long-standing political and societal issues, notably through judicial reform packages and a number of constitutional reforms. There is consensus over the need for a new civilian constitution to provide better guarantees for fundamental rights for all of Turkey s citizens. In 2012, the Turkish government started a process to solve the Kurdish issue, with the intention of ending the terrorism and violence from which the Southeast of the country, in 4

particular, has suffered since the late 1980s. Reforms over the last decade have also contributed to more democratic debate and the emergence of a vibrant and diverse civil society. However, the political climate is still marked by polarisation and there is an ongoing need to promote a culture of fundamental rights and dialogue, among other through a more inclusive approach towards civil society in decision-making processes. Turkey ranks 69 out of 153 countries on gender equality, with a score of 0.360 in the 2013 United Nations Development Programme (UNDP) Gender Inequality Index. The inclusion and participation of women at all levels of society remains a key challenge, and gender-based violence and child marriage remain issues of concern. Turkey continues to be an important transit and destination country for irregular migration. In 2012, 47 510 irregular migrants were apprehended in Turkey, which represents an increase of 7 % compared to 2011. In 2012, EU Member States still detected 37 531 third-country nationals illegally entering or attempting to enter the EU, coming directly from the Turkish territory, despite a decrease of 33 % compared to the previous year. Turkey has invested enormous effort and shown ability in dealing with the significant inflow of Syrian nationals into Turkey since the outbreak of the crisis in Syria. Despite this, the situation will remain a serious challenge for years to come, in particular because of the high number of urban refugees. In December 2013, Turkey signed a readmission agreement 2 with the EU, which led to the launch of a visa liberalisation dialogue. Turkey is a functioning market economy. In 2012, it had a GDP of EUR 613 billion and a GDP per capita of EUR 8 208, in current prices. However, regional variations are extremely high and further socio-economic development is needed, particularly in east and south-east Anatolia. Economic growth has been highly dependent on (mainly imported) energy and the consumption of natural resources, leading to growing greenhouse gas emissions and environmental degradation. Greenhouse gas emissions almost doubled between 1990 and 2009 (from 3.39 tonnes CO2 equivalent in 1990, to 5.13 tonnes in 2009), and increased in all sectors except agriculture. The energy sector is the largest contributor to total national greenhouse gas emissions. The economy s energy intensity in 2010 was 0.25 tonnes of oil equivalent per thousand euros of GDP. Turkey and the EU formed a customs union in 1995. The EU is by far Turkey s biggest economic partner, with 37.7 % of its total trade and around 71.3 % of foreign direct investments in 2012, while Turkey is the EU s sixth largest trade partner. Turkey s economy was severely affected by the global economic crisis, mainly through the collapse of domestic demand and its trade links with major industrialised economies. However, the impact of the crisis was mitigated by a resilient banking sector and fiscal stimulus measures. Turkey s overall short term external debt increased from USD 49 billion at the end of 2009 to USD 125 billion at the end of September 2013. The private sector s proportion of this debt was 86 % (USD 108 billion) at the end of September 2013. Turkey s net international investment position worsened, from -USD 276 billion at the end of 2009 to -USD 400 billion at the end of September 2013, which represents close to 50 % of Turkey s annual GDP. 2 C OJ L 134, 07/05/2014, p. 3 27. 5

Turkey ranks 69 out of 189 countries in terms of ease of doing business, according to the World Bank s Doing Business 2014 report. The score is particularly low for construction permits and resolving insolvency. Turkey has a large structural trade deficit, which reached USD 94 billion in August 2013. Energy imports constitute an important part of the trade deficit, though Turkey is also a net importer of various products ranging from machinery and equipment to iron and steel, plastics and chemicals. Despite the need for investment, domestic savings are low in comparison to Turkey s peers. The large current account deficit and Turkey s high degree of dependence on short-term capital inflows remain serious challenges which leave the country vulnerable to a sudden loss of investor confidence. Public finances are strong. The central government budget deficit was 2 % of the GDP in 2012, while the public debt burden decreased to 36.1 % of GDP the same year. The literacy rate for people aged 15 or more in Turkey was 95.2 % for men and 88.9 % for women in 2012. 31 % of adults aged 25-64 have earned the equivalent of a high-school degree, much lower than the Organisation for Economic Cooperation and Development (OECD) average of 74 %. Continuing an upward trend, in 2013 Turkey was 90th in results for the UNDP Human Development Indicator, with a score of 0.722. Turkey has been successful in creating new jobs in recent years. The labour force participation rate stands at 57.4 % and the unemployment rate fell to 8.2 % in 2012. Youth unemployment was at 15.7 % (for people aged below 25). However, at 45.2 % (in 2012), Turkey s employment rate was lower than all Member States, as a result of the exceptionally low participation of women in the labour force. High levels of informal employment, segmented labour markets and completing reforms to trade union legislation remain challenges. 2. Context for the planning of assistance 2.1. EU Enlargement Strategy As part of the accession process, Turkey will need to focus on fully meeting the political and economic Copenhagen criteria for EU membership and developing its ability to implement the EU acquis. The Commission s Annual Progress Reports and the EU enlargement strategy 3 set out priorities for the negotiations with Turkey. As regards the political criteria, the democratic transformation of the country needs to continue. The rule of law is at the heart of the accession process and is a key pillar of the Copenhagen political criteria. Social and political events in Turkey in 2013 and 2014 demonstrated the need to continue reforms in this crucial field. Turkey needs to encourage the proper functioning of the core institutions needed to ensure the rule of law. It is expected that Turkey will continue with inclusive, transparent and ambitious judicial reforms to ensure independent, impartial, efficient and accountable judicial systems. Legal reforms should continue to focus on addressing the core shortcomings which have led to the European Court 3 COM(2013) 700 of 16.102013 Communication from the Commission to the Council and the European Parliament, Enlargement Strategy and Main Challenges 2013-2014 and corresponding progress reports. 6

of Human Rights rulings against Turkey. Respect for human rights and protecting the rights of persons belonging to minorities remain key priorities and reforms are needed throughout these areas, in particular on freedom of expression, including freedom of the media, freedom of association and assembly, freedom of religion and anti-discrimination. The rule of law supports businesses, providing legal certainty and stimulating investment, jobs and growth. The fight against organised crime and corruption is fundamental to countering the criminal infiltration of the political, legal and economic systems. Good governance is also a key priority. This includes public administration reform, and improving economic governance and public financial management. As a candidate country, Turkey needs to provide stability for institutions which guarantee democracy. The proper functioning of these core institutions is vital, whether these are the national parliament, the government or the public administration. The transparency, accountability and effectiveness of institutions and public administrations, including ensuring a greater focus on the needs of citizens and business, needs to be prioritised. Turkey should continue reforms to safeguard citizens rights. Key bodies such as the ombudsman and state audit institutions must be independent and effective, and their recommendations need to be appropriately followed-up. As an integral part of the new enlargement strategy, Turkey is invited to improve its economic policy and its governance by preparing an annual national economic reform programme, based on the existing pre-accession economic programme. The national economic reform programme will lead to country-specific policy guidance on necessary reforms. Turkey is also invited to prepare a public financial management reform programme (a public financial management strategy and an action plan), covering the public finance reforms required in a sequenced and comprehensive manner. Turkey also needs to address shortcomings in justice, freedom and security. Its capacity to manage irregular migration and its fight against terrorism and organised crime are priority areas which require substantial reform. Reforms to integrated border management are required, including Turkey s adoption of necessary legislation, and Turkey s institutional capacity must be improved. Signing the EU-Turkey readmission agreement and the simultaneous start of the visa dialogue are the first steps towards visa liberalisation, which can give new momentum to EU-Turkey relations and bring concrete benefits for both. As regards the economic criteria, if Turkey accelerates the implementation of its comprehensive structural reform programme, it should be able to cope with competitive pressure and market forces within the EU in the medium term. Turkey s recent economic performance illustrates both the high potential of and the continuing imbalances in its economy. On the external side, Turkey s reliance on sustained capital inflows to finance a large structural current account deficit makes it vulnerable to changes in global risk sentiment, resulting in large exchange rate fluctuations and boom-bust cycles in economic activity. To reduce this vulnerability measures to increase national saving are needed, and fiscal policy has an important role to play in this. Adopting a fiscal rule would enhance budget transparency, provide an important fiscal anchor and improve credibility. Relatively high inflation continues to be a major challenge. Rebalancing the macroeconomic policy mix would help to ease the burden on monetary policy. In the medium to longer term, it is essential that the functioning of markets for goods, services and labour is improved, through structural reforms to increase international competitiveness. Economic competitiveness needs to be improved, as up to 58 % of exports consist of low technology goods, productivity rates and added value rates are still low and Turkey s capacity for innovation remains modest. The development of the private sector needs to be further 7

supported, by making improvements to the business environment. Agriculture is still an important sector for the Turkish economy, accounting for almost 25 % of total employment, but contributing only 8 % of the GDP, which indicates the structural weakness in the sector. Large economic disparities between Turkey s western provinces and its eastern and southeastern provinces are also reflected in education, in particular in lower enrolment rates for girls at higher levels of compulsory education. Education and human resource development need to be improved to reduce the mismatch between supply and demand in the labour market. The quality of jobs and decent work also need to be improved. Around 40 % of the labour force does not enjoy full legal protection, due to high levels of informal employment and insufficient enforcement of legal requirements and standards. Health and safety conditions at workplaces need to be improved. Key legislative gaps and institutional deficiencies currently jeopardise the good functioning of social dialogue, and trade union membership levels are low, as is coverage by collective agreements. Relative poverty and material deprivation rates are well above the EU average, but an overall policy framework for improving social inclusion has not yet been developed. Given Turkey s potential to become an energy hub and the common challenges it shares with the EU, the energy sector remains a priority for the EU. Continued efforts would allow Turkey to improve inter-connectivity and integration of gas and electricity. The same is true for transport where there is potential to bring Turkey and the EU closer together by connecting to the Trans-European Networks for Transport (TEN-T). As regards the ability to assume the obligations of EU membership, Turkey will need to continue an intensive process of aligning its national legislation with that of the EU. While all of the 33 negotiation chapters need to be addressed, particular efforts will be needed in areas relating to environment and climate change (chapter 27) and food safety, veterinary and phytosanitary policy (chapter 12), as alignment in these areas will require substantial investment and technical assistance. Other areas where progress is required include social policy and employment, transport and various elements of regulatory reform related to the economic aquis. In addition to aligning its legislation, Turkey needs to build up the necessary administrative capacity to allow it to ensure EU legislation is properly implemented. To do this, the process of public administration reform should continue, focusing on reorganising the public sector and ensuring the development of professional administration, at national and local level. Statistics capacities, including at regional level, also need to be upgraded to provide a sound basis for evidence-based decision making in all priority areas. 2.2. Relevant national/regional strategies At national level Turkey has a well-developed multi-annual planning process. The 10 th National Development Plan (NDP), covering 2014-18 and prepared under the Ministry of Development s lead, was adopted by the Turkish Grand National Assembly in July 2013. The NDP sets out the country s development objectives and defines strategic priorities in all the areas relevant for IPA II support. In line with the 10 th NDP, Turkey s Supreme Regional Development Council also developed a new National Strategy for Regional Development (NSRD). This is intended to serve as the backdrop for regional development, help ensure coordination on regional development and regional competitiveness, increase harmonisation between spatial development and socio- 8

economic development policies, and establish a general framework for regional and local level plans and strategies. In particular, the NSRD serves as guidance for the next generation of regional development plans, coordinated by 26 NUTS II development agencies at regional level in line with the Nomenclature of Units for Territorial Statistics (NUTS II). These focus on regional administrations action plans, other national and regional development strategies, public investment and budgeting processes, and specific territorial development programmes. Turkey has also developed an action plan relating to chapter 22 on regional policy and coordination of structural instruments. Turkey s Public Financial Management and Control Law (PFMC Law) requires a Medium- Term Programme (MTP) to be prepared each year, covering the following three years. This must be linked to a Medium-Term Fiscal Plan (MTFP). The MTP is based on macroeconomic policies and principles, and economic targets and indicators. The MTFP includes total revenue and expenditure plans for the next three years. In line with the PFMC Law, public administration institutions are required to prepare multi-annual strategic plans to determine strategic goals and measurable objectives. These must take into account development plans and programmes, relevant legislation and basic principles. Performance budgeting has been introduced, but planning needs to be coordinated better with the relevant budgets. Turkey also has numerous strategies and action plans in different sectors. In several cases, these are specifically designed to bring Turkey into line with EU requirements. Part IV of this Strategy Paper highlights the most relevant strategies and action plans whose implementation EU pre-accession assistance might support in specific sectors. 2.3. Conditions for managing pre-accession assistance The minimum conditions are in place in most sectors to allow pre-accession assistance to Turkey to be implemented through sector-oriented actions with multi-annual planning, and gradually through sector approaches. The institutional setting and lead institutions for each sector have been agreed with the Turkish authorities, the relevant national strategies and action plans have been mapped, and sector working groups have been set up and have begun consultations for programming preparations. The current main weaknesses hindering the move to fully-fledged sector approaches include, the lack of well-defined national sector policies/strategies, due to too many overlapping strategies and in some cases outdated action plans, a lack of sequencing and timing for activities set out in action plans, the lack of a clear link between national strategies/action plans and the national budgetary process, and a lack of fully structured coordination with IFIs and other donors under the leadership of the Turkish authorities. In recent years pre-accession assistance to Turkey has been managed with indirect management, i.e. EU budget implementation tasks delegated to the Turkish authorities, in fields such as environment, transport, regional competitiveness, human resource development and rural development, with institutions set up specifically for this purpose. The relevant institutional capacity will be consolidated and further built on during the new IPA II period. Turkey needs, however, to strengthen its capacity to absorb funds, achieve results and implement EU financial assistance in a timely manner. The focus on more targeted multiannual sector programmes will require greater ownership by the lead institution for each 9

sector and stronger cooperation among stakeholders in order to improve efficiency and effectiveness. To this end, direct management mode might be used alongside indirect management. Cooperating with IFIs and IOs, and delegating budget implementation tasks to them, may be an option in some cases, if the relevant requirements are met. For actions in all sectors, twinning shall be used whenever relevant. This allows Member States to share long-standing, high-level experience and insights on applying the relevant acquis. Technical assistance, supplies, works and grant schemes are also available as types of financing, depending on the particular action's needs. Turkey will be eligible for sector budget support, provided that the following four preconditions are met: a stable macro-economic framework; a credible programme to improve public financial management; transparency and oversight of budget; and credible and relevant sector strategies that are consistent with the EU enlargement strategy. 2.4. Donor coordination and complementarity with other EU assistance Relatively few international donors provide grant support to Turkey. However, IFIs 4 are very active with loan programmes, particularly in sectors such as energy, private sector development, transport and environment. The Council of Europe, several UN agencies 5 and other specialised IOs (e.g. the International Organisation for Migration) are also active in Turkey, working on judicial reform, migration management, employment and social policies. Some of these also receive EU grants to implement pre-accession assistance in their fields of expertise. To avoid overlapping assistance, the Commission systematically consults and meets Member States embassies, IFIs and IOs, especially at country level. On the Turkish side, the Ministry for EU Affairs made initial coordination efforts, when it was preparing the grounds for a sector approach in the 2012-13 IPA programming period. Sector working groups were established and are expected to be revived to prepare multiannual sector programmes. In parallel, for investment-related loans, the Turkish Treasury has played a key role. For the future pre-accession assistance stronger coordination should be supported by respective Turkish lead institutions on a sector basis. To make best use of IPA II funds and to achieve a stronger overall impact, cooperation with IFIs should be increased and further systematised during the programming stages, in close partnership with the Turkish authorities, with a view to blending IPA II grants with IFI loans. Discussions on the possibility of setting up a Turkey-specific Investment Programme (TIP) gained momentum while this Strategy Paper was being drawn up. 2.5. Consistency with EU policies Financial assistance in the priority areas identified in this Strategy Paper will be granted in line with and in support of the enlargement strategy for Turkey. This assistance will be consistent with EU policy, in particular with the Europe 2020 strategy and relevant macroregional strategies, the EU flagship initiatives to boost growth and jobs as well as the EU climate policy objectives. In drafting its National Development Plan, Turkey has taken many 4 Including the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), the World Bank (WB), the Council of Europe Development Bank (CEB), Germany s KfW, and the Agence Française de Développement (AFD). 5 UNDP, United Nations of International Children s Emergency Fund (UNICEF), UN High Commissioner for Refugees (UNHCR), the International Labour Organisation (ILO). 10

aspects of the Europe 2020 strategy into account. Turkey s objectives between now and 2020 reflect its level of economic development and its stage in the accession process. PART III: THE OVERALL DESIGN OF PRE-ACCESSION ASSISTANCE TO THE COUNTRY The European Commission s 2013/14 Enlargement Strategy emphasises the need to address fundamental reforms first. For Turkey, this means an even stronger focus on democracy and governance, the rule of law and fundamental rights and measures to encourage socioeconomic development in line with the country s specific needs. Turkey s investment needs in order to carry out reforms are far greater than the IPA II resources available. Prioritising areas of assistance is therefore essential. Support will primarily be given to Turkey to carry out national reforms that match the EU s priorities. It will be increasingly important to increase synergies with the assistance provided by international financial institutions, international organisations and other donors. For 2014-20, pre-accession assistance will fall under two pillars: democracy and the rule of law, and competitiveness and growth. Democracy and Rule of Law Turkey needs to further build on its previous track record for reform in the judiciary to strengthen relevant institutions as part of an independent, impartial and efficient third power, separate from well-functioning legislative and executive powers. As regards fundamental rights, reform efforts need to result in improved protection for human rights and fundamental freedoms, the rights of persons belonging to minorities and in vulnerable groups, including lesbian, gay, bisexual, transgender and intersex (LGBTI) people, and other groups affected by discrimination and violence. There is a need to promote dialogue across the political spectrum and in society more broadly, and to encourage respect for fundamental rights in practice. In Turkey this particularly concerns women rights and gender equality, children s rights, and labour and trade union rights. These topics are crucial for meeting the political Copenhagen criteria and for acquis chapter 23 on judiciary and fundamental rights. Home affairs is another key area for financial assistance, in particular developing a fully functioning integrated border management system, with appropriate migration management and asylum practices, given the migratory pressures experienced by Turkey and the EU. The fight against organised crime, including against trafficking in human beings, and the improvement of law enforcement also need to be further addressed, in line with negotiation chapter 24 on justice, freedom and security. Pre-accession assistance will be available to support a broader dialogue and cooperation framework between EU and Turkey. This will allow the EU and Turkey to address the full range of justice and home affairs policy fields and put in place steps towards visa liberalisation, in line with the visa liberalisation roadmap that was launched in in December 2013. An active civil society demonstrates effective pluralism which implies respect for fundamental rights and freedoms, the rule of law and the possibility of social and political 11

change. Civil society activities can stimulate and expand the space for dialogue and cooperation on matters of public interest, including on the EU accession process. Turkey s participation in Union programmes, allowing for exchanges between Turkish and EU citizens, is an important complementary measure in this area. Turkey particularly needs more inclusive approaches to formulating policy and making decisions of public interest. Civil society organisations also play an important role in promoting fundamental rights. In this spirit, the Commission will continue to support civil society development and civil society dialogue with a specific sub-sector programme, but will also make additional funding available in other sectors where needs exist. Turkey needs to step up its anti-corruption efforts and measures, strengthening both preventive and repressive standards as part of improving its anti-corruption policy development and implementation. While Turkey has a relatively strong public administration in general, further reform is required to bring it into line with the principles of the European administrative space, i.e. to have an effective, efficient, responsive, serviceoriented, competent and responsible public administration. For a more stable business and trade environment that will help to increase both domestic and foreign investments, Turkey needs to reform the public financial management system, improve its focus on the rule of law and anti-corruption measures, and carry out targeted public administration reform, as highlighted in the Commission s fundamental first enlargement strategy for 2013-14. Competitiveness and Growth The EU approach to financial assistance for Turkey takes into account its status as a fast developing middle-income country with large economic and social disparities between different population groups and geographical regions. It aims to provide support for economic, social and territorial development and encourage smart, sustainable and inclusive growth. The EU will therefore focus on support to improve social development and social inclusion, through funding in the education, employment and social policies sector, addressing areas where Turkey still faces significant challenges. In addition to being necessary to align Turkey with the acquis on social policy and employment (negotiation chapter 19), progress on reforms is also directly relevant to Europe 2020 strategy targets on employment rates, educational attainment social inclusion and the fight against poverty. Particular attention will be paid to support for implementing elements of Turkey s national action plan on gender equality and for meeting the needs of vulnerable groups. The EU will take the different levels of socio-economic development across Turkey into account when planning support that involves physical capital, including improving infrastructure. Promoting environmental protection, resource efficiency and climate action are also key factors when drawing up priorities for financial assistance. Another key consideration will be the relevance of specific actions for improving exchange and interconnectivity with EU Member States and other enlargement countries. Based on these, focused multi-annual programmes will be supported in the environment and climate action, energy, transport and competitiveness and innovation sectors. In line with Turkey s new more decentralised and differentiated approach to regional development, priority areas related to economic, social and territorial development will be partly based on geographical concentration. A pre-defined proportion of allocations will be earmarked for actions focused on selected NUTS II regions in the south-east and east of the country. Details of this approach will be decided when the sector operational programmes are prepared. Assistance will be also available to support implementing Turkey's action plan of 12

chapter 22 regional policy and coordination of structural funds that has been opened in November 2013. Turkey will also continue to receive support for strengthening its capacity to meet the obligations of EU membership, in particular those relating to alignment with and adoption, implementation and enforcement of the EU acquis. Acquis alignment, capacity building and investment needs will be addressed under integrated sector programmes when conditions are ready. This particularly affects the environment and climate action sector and, to a lesser extent, the transport sector, as alignment in these areas will require substantial investment and technical assistance. Other areas where support for acquis alignment and institutional capacity building will be provided include food safety, veterinary and phytosanitary policy, health and various elements of regulatory reform related to the economic aquis. In the area of agriculture and rural development, additional support will be granted to improve the competitiveness of the agri-food sector, to help its gradual adjustment to EU standards and to support diversification of economic activities in rural areas. In addition, IPA II support may also be provided in response to unforeseen priority needs that are relevant to accession negotiations but that do not fall under the priorities set out in this Strategy Paper. In particular, this may include ad hoc and short-term technical assistance provided under the Technical Assistance and Information Exchange (TAIEX) programme and through twinning projects. Finally, when programming IPA II assistance, particular attention will be paid to a number of cross-cutting issues that impact more than one sector and thus require action across a number of sectors. These include the prevention of and fight against corruption, environmental sustainability and climate action, gender equality strengthening democracy, human rights and civil society participation as well as protection of cultural heritage as appropriate. Expenditure relating to climate will be tracked across the range of IPA II interventions, in line with the statistical markers on climate change mitigation and adaptation developed by the OECD s Development Assistance Committee. Indicative financial allocations per policy area and per sector, resulting from the priorities set out in this Strategy Paper, are set out in Annex 1. PART IV: EU ASSISTANCE DURING THE PERIOD 2014-2020 1. Democracy and governance a. Needs and capacities in the sector Compared with other accession countries, Turkey has a relatively strong public administration. Over the last decade the Turkish government has launched reforms to further increase the public administration s efficiency and has begun to bring Turkey into line with the relevant acquis and has set up regulatory frameworks. Nevertheless, civil service reform to improve human resources management in the public sector and ensure merit-based advancement has not yet been carried out. Further efforts are needed, as an effective, efficient, responsive and service-oriented public administration is a necessary condition for good governance, stable economic conditions and ensuring the institutional capacity to implement the EU acquis. Further issues that Turkey will need to address include local administration 13

reform, including better investment planning and systematic consultation of civil society, and further capacity building for the national parliament, as the centre of the democratic institutions system. Public financial management is an integral part of the public administration reform efforts and the basis for economic governance and sustainable socio-economic and structural reforms. A public financial management system covers a number of sub-systems, including revenue administration (customs/tax), budget preparation, budget execution with cash management, public debt, public procurement, accounting and reporting, public internal financial control and external audit. Comprehensive public financial management reform covering reforms in the different sub-systems is particularly relevant to the EU enlargement strategy and to make use of the sector budget support modality available under IPA II. Turkey does not so far have a comprehensive public financial management reform programme in place, although reforms are ongoing in various sub-systems. Turkey must address issues including public internal financial control, independent and effective external audit, improving its public procurement legislation and implementation, improving its strategic management and planning (which also link policy better to budgeting), and improving its accounting and reporting. A number of negotiation chapters cover public financial management reform sub-systems, including public procurement (chapter 5), taxation (chapter 16), economic and monetary policy (chapter 17), customs (chapter 29) and public internal financial control and external audit (chapter 32). There is therefore also a need to address the accession-specific aspects of public financial management. Public financial management is also a key component of the institutional arrangements needed to implement EU cohesion policy. An important cross-cutting area in this sector is statistics. Turkey is already well-aligned with the acquis in this area, but still needs to further improve its data quality for statistics, including improving cooperation between the Turkish Statistical Institute and the main data providers. Turkey is considered a functioning market economy, but it nevertheless needs to improve its economic policy and economic governance. Existing multilateral surveillance mechanisms will address Turkey s challenges relating to macroeconomic stability and the functioning market economy, leading to country-specific policy guidance. Implementation of this policy guidance will be subject to an annual cycle of stock-taking. Sustained reform is also needed on aspects of the economic acquis, such as requirements relating to the right of establishment and freedom to provide services (chapter 3), free movement of capital (chapter 4), financial services (chapter 9), and more effective market surveillance in the context of free movement of goods (chapter 1), for which Turkish legislation also needs to be further aligned with the acquis, and improving SME access to quality conformity assessment services. Other important areas concern antitrust and state aid in light of competition policy (chapter 8), and outstanding requirements in company law (chapter 6). Turkey s consumer protection and product safety (part of chapter 28) are not yet fully aligned with EU requirements in this area, and the institutional capacity of bodies such as consumer courts and arbitration committees needs to be strengthened. Legislation on intellectual property rights (chapter 7) is largely in place, but procedures need to be set up, in line with the acquis, to effectively enforce intellectual property rights. Coordination between different stakeholders in this area needs to be improved. On customs (chapter 29), there is a need for greater alignment with the EU customs code, and gaps remain in Turkey s alignment 14

with EU rules on free zones and duty relief. Shortcomings on surveillance, managing tariff quotas, and practices not in line with the customs union need to be addressed. Efforts to facilitate legitimate trade and non-fiscal roles of the customs authorities need further support. Turkey also needs support to meet the requirements for the technical opening and closing benchmarks in other negotiation chapters. Regulatory reform and well-functioning, independent regulatory agencies and authorities are required to effectively implement and enforce the acquis in areas such as antitrust, state aid, telecommunications and postal services. Turkey has ratified major anti-corruption conventions over the last years and has worked to implement its 2010-14 national strategy and action plan in this area. However, Turkey needs to continue its efforts, including increasing its capacity to implement and enforce anticorruption measures and extending the code of conduct to cover the legislature and the military. Turkey should also follow up recommendations issued by the working groups set up as part of the national anti-corruption strategy, such as conducting annual country-wide corruption perception surveys and establishing comprehensive tracking of data on corruption. Civil society can play an important role as a watchdog, helping to promote transparency in this area. Another element covered under this sector concerns Turkey s participation in Union Programmes and Agencies, an area where Turkey has been active and developed its capacity. In recent years, Turkey has participated in the following programmes and agencies: Lifelong Learning, Youth in Action, Culture 2007-13, Customs 2007-13, Fiscalis 2007-13, the Competitiveness and Innovation Framework Programme, the 7 th EU Research Framework Programme and in the European Environment Agency. Turkey has also ratified the agreement on participation in the European Monitoring Centre for Drugs and Drug Addiction. It is important for both Turkey and the EU that Turkey continues its participation in Union Programmes and Agencies. Various institutions are involved in the democracy and governance sector and there is neither one specific sector lead institution nor a comprehensive strategy covering public administration reform, acquis alignment and regulatory reforms. The main institutions in the anti-corruption field are the Prime Ministry Inspection Board and the Council of Ethics. Once adopted, the updated national anti-corruption strategy and action plan will be the key strategic documents. 1.2. Objectives, results, actions and indicators The objectives of assistance in this sector are to support improvement leading to an efficient, responsible and accountable public administration, which provides services to citizens and businesses, to enhance ethical standards and anti-corruption tools both for prevention and repression, to improve public financial management, to enhance economic governance to facilitate regulatory reform leading to better alignment with EU standards, in particular with the EU acquis relating to economic criteria and to support progress on meeting the relevant negotiation chapter benchmarks. Expected results are: public administration reform (PAR) coordination, policy-making, civil service and public administration organisation and governance and service delivery to citizens and businesses, including at local level are improved; 15

an integrated approach to prevention and the fight against corruption is implemented, in line with an updated national anti-corruption strategy; integrity systems and ethical standards are in place in public administration and a convincing track record of continued investigations of corruption exists; economic governance is enhanced and Turkey s EU accession process is supported in relevant areas by regulatory reform, acquis alignment, institution building and capacity building; public financial management is improved, after implementing sequenced reforms in different sub-systems, allowing Turkey to meet EU accession requirements in the relevant negotiation chapters; improvements are made to the capacity for efficient oversight of Turkish democratic institutions, especially the parliament; participation by Turkey in Union Programmes and Agencies increased. Actions to achieve these results include: Establishing structures in line with the new model of metropolitan municipalities; providing support to the Union of Municipalities and the Citizens Assemblies in strengthening participatory decision making at local level; extending e-government and e-inclusion to increase citizens democratic participation; promoting town-twinning with EU counterparts; providing support to the Turkish Grand National Assembly to better fulfil its oversight functions based on needs assessment. Assessing the specific reform requirements in different public financial management subsystems, e.g. revenue administration (tax/customs), budget preparation, budget execution with cash management, public procurement, accounting and reporting, public internal financial control and external audit; taking measures to align Turkish law and build capacity to meet acquis requirements in public procurement, EU budgetary frameworks, public internal financial control and external audit and support to implementation of the specific reform plans these include implementing the priorities in the Public Internal Financial Control (PIFC) policy paper and supporting the Turkish Court of Accounts to fully implement the law enacted in December 2010. Supporting the new national economic reform programme, which will replace the existing pre-accession economic programme and provide the strategic framework for EU assistance (in addition to fiscal issues, the new programme will increasingly also manage external sustainability and structural obstacles to growth). Implementing Turkey s national anti-corruption strategy; improving specific accessionrelated requirements on statistics, taxation and customs, including IT interconnectivity and interoperability; supporting acquis alignment, regulatory reform and institution building, and the operational and administrative capacity building required for the process of accession negotiations and in particular to meet the technical requirements set by negotiation chapter benchmarks. Main indicators of achievement: Progress made towards meeting accession criteria (EC); 16

Composite indicator Government Effectiveness (WB), Burden of Government Regulation (WEF) and Regulatory Quality (WB); Composite indicators Global Corruption (TI) and Control of Corruption (WB); Statistical compliance (Eurostat). Annex 2 contains additional information on the indicators sources and baseline and target data. a. Types of financing Actions covered under this sector will mainly be addressed through stand-alone actions in the context of annual programming, although a longer-term programming approach will be encouraged in the medium term. A limited financial envelope for project preparation and institution building activities (twinning, technical assistance and direct grants only) will be programmed through Regulatory Reform and Acquis Alignment Actions in a needs-driven manner and on a rolling basis. This will facilitate Turkey s regulatory reform in fields that are not covered by priority sectors, in particular relating to alignment with economic acquis, and will support progress on negotiation chapter benchmarks. Allocations indicatively earmarked in this sector will also be used to co-finance Turkey s participation in Union Programmes and Agencies, in line with the principle of increasing contributions from the candidate country. Between 2014 and 2020, EU support will ensure Turkey continues to participate in Union Programmes and Agencies as much as possible. b. Risks Political will from the Turkish government is crucial to making progress on key reforms in fields such as public financial management or anti-corruption. Political dialogue on these matters will need to accompany the preparation of actions receiving IPA II financial assistance. Sub-sector: Civil society a. Needs and capacities in the sub-sector There are more than 98 000 associations, with a total of approximately nine million members, in Turkey. Only some 18 % of these members are women. Membership in political parties, chambers and sports clubs is most common, but religious organisations are also popular. In addition, there are over 5 000 foundations. Their operations are mainly financed by their own resources and/or they raise funds and use them for charitable purposes. Few of these foundations provide grants to civil society organisations. Thus, civil society organisations working on advocacy have so far benefitted only to a limited extent from the strong tradition of giving in Turkey. 6 Civil society organisations (CSOs) still face a legal environment with bureaucratic obstacles, in particular relating to their operation, their funding and, in some cases such as for 6 Guiding Principles for EU Support to Civil Society in Turkey: http://www.avrupa.info.tr/fileadmin/content/files/file/csd/guiding_principles_for_ec.pdf. 17